A combination of brutal economic conditions and the disruptive force of e-commerce is continuing to have an impact on retailers of every size – administrators are moving in on both the weakest and those who fail to adapt their business model to today's connected consumer. It's perhaps unsurprising then to learn that retailers are making e-commerce their No 1 investment priority, as revealed in the recent report, IT in Retail 2013.

The report analysed the IT strategies of 150 top UK retailers, representing sales of £203bn and 70% of the UK market. This is the second consecutive year that e-commerce investment has outstripped spend on store systems, following the rapid acceleration in online and mobile sales in recent years. Before that, store systems had consumed as much as 80% of retailers' IT budgets.

The bad news, however, is that overall spending across the retail sector has fallen over the last 12 months. IT spend as a percentage of sales was 0.9% in 2012, compared to 1% in 2011, representing a 10% overall fall in IT spending.

What is apparent is that retailers are looking to invest in online, supply chain and customer systems as they seek the best returns on their IT investment.

Better customer dataWe have seen a resurgence in customer relationship manager (CRM) spending in the last couple of years, as the growth of online has led to retailers looking to manage and make better use of their growing bank of customer data. Today's multi-channel customer will readily provide name, address and payment information without incentive, which has suddenly made building a CRM database a much more affordable and worthwhile exercise than it was a decade ago.

For retailers today there is simply more to be gained from implementing consumer-focused solutions that enable a consistent omni-channel experience for customers, rather than routine upgrades to in-store checkouts and electronic point of sale systems.

Cannibalisation of the high streetInterestingly, 23% of the UK's top 150 retailers said they didn't have a transactional website. Those who did saw online sales represent 7.3% of total sales, which is an increase from 6.3% the previous year. Over the last 12 months we have also seen the hype about mobile-commerce start to become a reality, with just under half of retailers stating they are using it as a sales channel, while a further 13% say they were planning to use it in the future.

While e-commerce has grown 16% this year, overall retail sales rose by only 1.5%, suggesting the continued cannibalisation of high street sales. Put differently, this equates to the closure of 40 to 50 stores per week, a figure that is likely to rise significantly as more people shop online. And when asked where online sales would peak, department stores and mass merchandisers thought it could be as much as 30-40% of sales.

Survival of the fittestSo what does all this mean for the retail sector? Ultimately the winners and losers will be determined by the approach they take to creating a consumer-centric all-channel business. We're witnessing an evolution that we see evolving in three distinct phases.

First, the sales and enablement phase that saw investment in transactional websites, CRM and fulfilment capability – essentially the dash for cash stage! What was missing from this was the consumer, and the next phase will be centred firmly on them, namely providing a seamless shopping journey, where product and offers are tailored or personalised. Key to delivering this will be an ultra-responsive supply chain, one that delivers against an expectation of always available, buy anywhere, delivery anywhere and at anytime.

Finally we will see the sobering phase, of the pursuit for profitability. This new online era that ushered in margin erosion as a result of higher fulfilment costs will have to be addressed. Absorbing a lower profit contribution from the online channel may have been an option when it only represented just a single digit share of the business but, as the report points out, this is set to change and in some sectors will grow to in excess of a fifth of the business.

Overall, consumers are in the driving seat and the catalyst for change is technology – for the vast majority of retailers, standing still will not be an option.